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1. The Regional Seminar on Promotion of Energy Efficiency in Industry and Financing of Related Public and Private Investments was convened at United Nations Conference Centre (UNCC) in Bangkok, from 30 November to 2 December 1999. It was attended by 45 participants and resource persons representing governmental organizations, financing institutions or private sector entities from the following countries of the Asian and Pacific region: Australia, Bangladesh, China, India, Indonesia, Islamic Republic of Iran, Japan, Kazakhstan, Mongolia, Republic of Korea, Russian Federation, Sri Lanka, Thailand, Uzbekistan, and Viet Nam. The Economic Commission for Europe (ECE), the United Nations Development Programme (UNDP) and the World Bank were also represented at the Seminar. 2. Experts from a number of other entities also attended the Seminar, including Asian Institute of Technology (AIT), Central Asia Energy Advisory Group (CAEAG), EC-ASEAN Cogen Programme (COGEN), Energy Conservation Center of Thailand (ECCT), Cosmo Engineering Co. Ltd. (CEC), International Technical Coordination Agency Ltd. (ITEC), Industrial Finance Corporation of Thailand (IFCT), International Institute for Energy Conservation (IIEC), New Energy and Industrial Technology Development Organization (NEDO) of Japan, Pusat Tenaga Malaysia (Malaysia Energy Center) (PTM) and Siam Iron and Steel Co. Ltd. (SISCO). Observers from the Ministry of Industry, Cambodia, and Nippon Mitsubishi Oil Corporation, Japan also attended. top B. Opening of the Meeting 3. In his opening statement, the Chief of the ESCAP Environment and Natural Resources Development Division highlighted the main objectives of the seminar. The Seminar aimed at providing a useful opportunity to exchange information and discuss common perspectives on industrial sector development strategies and on suitable regulatory and other policy measures for promotion of public and private sector investments in productivity development and energy efficiency. It was emphasized that in many industrialized, newly industrializing and developing countries, as well as in countries with economies in transition, the industrial sector accounted for a large and often growing share in overall energy use. Efficiency of energy conversion and energy consumption in industry was thus an important dimension for achieving sustainable development. It was noted that in some countries of the ESCAP region, governments had established dedicated energy conservation promotion funds, which are replenished, from annual budgets, and in some cases from specifically earmarked sources of revenues, such as taxes on energy consumption. The exchange of information on the effectiveness of such measures and of other policy initiatives was among the priority issues suggested for discussion. The Chief of the Division also noted that an additional objective of the seminar was to promote international cooperation and to facilitate the exchange of information between organizations interested to participate in bi- or multilateral energy efficiency promotion and greenhouse gas emissions reduction projects under arrangements such as those foreseen in the Kyoto Protocol. 4. The First Secretary and Deputy Permanent Representative of the Embassy of Japan to ESCAP welcomed the participants. He noted that, as an energy import dependent country, Japan had a long standing tradition of placing great emphasis on efficient use of resources, particularly energy resources. Owing to its policies on promoting conservation and efficient use of energy, Japan had managed to maintain one of the lowest energy intensity ratios in the manufacturing sector. The linkages between energy production, end-use and issues related to environmental protection were highlighted. Promotion of energy efficiency provided many options for "win-win" situations: producers as well as consumers benefitted from reduced costs of energy use. The Representative further explained that in hosting the Third Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) in Kyoto in December 1997, the Government of Japan had affirmed its full commitment to the global consensus building process on hedging against possible negative impacts of climate change. Over the past two years the Government of Japan as well as the private sectors had established new programmes and pilot projects to operationalize the spirit of the Kyoto protocol. top C. Election of Officers 5. Selected experts were invited to chair individual sessions on a rotating basis. Sessions were chaired by participants and resource persons from Japan, Malaysia, Mongolia, Republic of Korea and the Russian Federation. top D. Adoption of the Seminar Programme 6. Participants adopted the Seminar Programme which is attached as Annex I to this Report. top 7. The secretariat presented an overview introducing the main topics suggested for discussion at the seminar. The introduction related to aspects such as energy consumption and sustainable development, structure and trends of energy consumption in industry, potentials for energy efficiency improvements in industry, barriers to energy efficiency investments, and policy options for promotion of energy efficiency. 8. It was observed that in 1996, total global annual consumption of commercial energy stood at 8,380 million toe. During the 1990s, global commercial energy consumption was estimated to have grown on average by some 2.3 per cent per year. A continued growth of global energy consumption was expected. 9. It was recalled that great disparities in access to modern forms of energy existed, in particular with regard to electricity, in the ESCAP region. Whilst in the industrialized countries, per capita consumption of electricity reached or exceeded 8000 kWh per year, per capita electricity consumption in the lesser and least developed countries still remained low, sometimes even below 400 kWh per capita per year, suggesting that the average levels of consumption between countries can differ by as much as a factor of 20. 10. The secretariat's introduction also reflected on the significance of the sustainability question. It was noted that the world still had ample supply of lignite, coal, oil and gas, but these reserves were not infinite. Recent estimates indicated that proven reserves of coal may last for another 218 years, reserves of gas another 63 years, and reserves of oil only for another 41 years at their current production rates. It was noted that the growing environmental concerns also called for a stringent review of energy systems and energy sector development policies. 11. Modern commercial energy supply systems included long chains of energy conversions and, as shown by many studies, efficiency gains and improvements were possible and necessary at almost all stages of energy conversion, transmission and distribution. 12. It was observed that industry accounted for approximately 43 per cent of global energy end use. Energy use in the industrial sector was dominated by the industrialized countries, which accounted for some 45 per cent of world industrial energy use. Developing countries and countries with economies in transition used approximately 32 per cent and 23 per cent of world industrial energy, respectively. top 13. Energy intensity in manufacturing tended to differ from country to country, depending on indigenous resource endowment and local relative energy prices. It was noted that iron and steel, chemicals, petroleum refining, pulp and paper, and cement production were among the most energy intensive industrial sub-sectors which accounted for approximately 45 per cent of all industrial energy consumption. 14. It was noted that with regard to potentials for energy efficiency improvements in industry two types of energy efficiency measures could be taken: efficiency retrofits and investments at the design stage. It was explained that low-cost investments involved active and efficient in-house energy management, which included establishment of in-house energy management committees or groups; designation of energy managers; data collection, improved maintenance, safety issues; and review of operational efficiency. 15. Improved waste heat recovery, combustion control of furnaces, co-generation of electricity and process heat and improvements of heat exchangers were identified as energy efficiency options involving replacement of selected equipment and medium-size investment costs, whilst major industrial process modifications involving large amounts of investments included among other, installation or improvements in advanced process controls, installation of gas pressure recovery generators (in the iron and steel industry) or installation of waste heat recovery generators ( in the cement industry), to name a few selected examples. 16. It was noted that recent studies that have attempted to assess the technical potentials of possible energy efficiency improvements have shown that in some of the energy-intensive sub-sectors energy savings of up to 50 per cent were technically possible in many industries and many countries. However, it was also observed that many energy efficiency potentials existed but remained unused suggesting that there were barriers to the implementation of energy efficiency improvement measures. Among the barriers identified were aspects affecting profitability of investment, as well as psychological aspects. 17. It was noted that several empirical studies revealed that energy efficiency investments that could be recovered in a short period of time (e.g. in less than two years) were likely to be supported by management and implemented. On the other hand, it was observed that energy efficiency investments which were thought to take five years or longer pay-back periods, investments would only get approved by rather few managers in industry. Furthermore, it was noted that, most energy efficiency retrofit projects required a somewhat longer period to recover investment costs. Among managers in industry, energy efficiency investments may therefore not be regarded "high priority" issues "requiring urgent action". top 18. It was also noted that energy prices below real costs of energy can lead to under investment in energy efficiency. It was noted that in many countries, and in particular in many developing countries, energy prices did not as yet reflect the real and full costs of energy supply. Energy supply establishments were often quasi-government entities and thus received direct or indirect subsidies. Energy pricing policies obviously had an immediate bearing on the viability of energy efficiency investments, and the perceived need or feasibility of such investment by the investor. 19. Capital availability and capital costs were also identified as important factors which directly determined the feasibility of energy efficiency investments. In many of the countries represented at the seminar, access to and relative costs of external financing were an important barrier preventing some potential investments from occurring. 20. Together with information and transaction costs, uncertainty and risks (related to energy prices and capital costs) were also identified to be important barriers that can prevent an investment from being made. High inflation and unstable exchange rates were also highlighted as being major issues in developing countries. 21. It was suggested that governments should have at their disposal a variety of optional economic instruments through which they can enhance energy efficiency improvements. These instruments could include tax credits, or subsidized or low-interest loans. Other tools for the promotion of energy efficiency included regulatory measures, such as energy conservation laws prescribing mandatory or voluntary minimum measures for efficient energy management in industries or minimum energy efficiency standards. Information and educational programmes, such as energy manager training or energy audit programmes also had their own role to play and served as indirect ways to promote energy efficiency investments in a longer term perspective. 22. The ESCAP consultant gave a detailed overview of the options for prudent investment financing in industry. He explained the main project evaluation methods, including methods based on non-discounted and discounted cash flow projections (payback method, accounting rate of return, internal rate of return, net present value, and profitability index). Comparing alternate ways of investment financing, the consultant discussed self-financing through stocks, short- or long-term debt financing, and third party financing. With regard to analyzing access to and use of external sources of financing, the consultant reviewed the project appraisal process applied by most financing institutions highlighting the most common eligibility criteria. Participants expressed their appreciation of the informative overview presented by the consultant. top B. National Policies and Programmes for Promotion of Energy Efficiency Investments (Session 3) 23. Participants and resource persons from Japan, Republic of Korea, Russian Federation, Sri Lanka, Thailand and Kazakhstan presented papers outlining the main thrust of national policies and programmes for energy efficiency promotion in general, and for the encouragement of private sector investments in particular. In some countries dedicated energy conservation or energy investment promotion funds had been established. Participants exchanged information on the detailed modalities of allocating revenues for the financing of such programmes. Participants also discussed established criteria and procedures for disbursement. In some countries, funding or co-financing was made available upon request of industries to contribute to or cover costs of external energy audits or assessments of energy efficiency potentials. In some other countries, energy conservation promotion funds were established to provide investment financing options on comparatively concessionary terms. Participants also discussed the challenges faced by countries with economies in transition in promoting investments in energy efficiency. top C. Informal Round Table Discussion on Promotion of Energy Efficiency in Industry and Financing of Related Investments (Session 4) 24. An informal round table discussion was held and co-moderated by Professor Adrian Bradbrook, Chairman, IUCN Climate and Energy Law Working Group, University of Adelaide, Australia and Dr. Manida Unkulvasapaul, Senior Environment Specialist, World Bank, Thailand Office, Bangkok. The panel included following other experts: Mr. Alan Dale Gonzales, Adviser, EC-ASEAN Cogen Programme, AIT, Pathumthani, Thailand; Mr. J?rg Matthies, Senior Adviser, Central Asia Energy Advisory Group, Tashkent, Uzbekistan; Ms. Nateerai Lerdpong, Senior Credit Officer, Project Financing Department 4, Industrial Finance Corporation of Thailand (IFCT), Bangkok, Thailand; and Mr. Terry Kraft-Oliver, Senior Adviser, International Institute for Energy Conservation (IIEC), Bangkok, Thailand. The panel exchanged views and experiences and reflected on a variety of policy issues related to promoting energy efficiency in industry. Main aspects on which participants agreed are noted under Section G. of the Report. top D. International Initiatives in Promotion and Financing of Energy Efficiency Investments to Mitigate GHG Emissions (Session 5) 25. Participants exchanged information and discussed national and international initiatives in promotion and financing of energy efficiency investments to mitigate Green House Gas (GHG) emissions. 26. Mr. Kok Kee Chow, Deputy Director General of Malaysian Meterological Service, and formerly Chairman of the Subsidiary Body on Scientific and Technological Assessment (SBSTA) established by the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) briefed participants on the latest status of international consultations concerning ratification and implementation of the UNFCCC Kyoto Protocol. 27. Ms. Aki Maruyama, Research Associate at Institute for Global Environmental Strategies (IGES), Japan, discussed aspects of private sector participation in implementing the "Clean Development Mechanism" (CDM). 28. Mr. Kenzo Hayashi, Director of Overseas Affairs Division at New Energy and Industrial Technology Development Organization (NEDO), Tokyo, Japan gave an overview on Japan's Financial Support System for Promotion of Greenhouse Gas Reproduction. 29. The representatives of United Nations Economic Commission for Europe (UNECE) and United Nations Development Programme (UNDP) informed participants of their respective current technical assistance programmes and services. top E. Initial Experiences with Integrated Assessment of Techno-Economic and Environmental Feasibility of GHG Mitigation Projects (Session 6) 30. Participating experts and resource persons presented selected case studies from different countries (Thailand, Viet Nam, Islamic Republic of Iran) and different sectors (iron and steel industry; cement industry, hotel industry). The studies highlighted the short and long term environmental benefits of energy efficiency investments. The case studies also assessed the impacts of respective projects on future greenhouse gas emissions. In their discussion, participants shared the observation that considerable potentials existed for effective joint implementation projects or similar forms of international cooperation which can lead to reduce GHG emissions. top F. Country Presentations and Presentations of Other Organizations (Session 7) 31. Participants and resource persons from Bangladesh, China, Indonesia, Malaysia, Mongolia, Islamic Republic of Iran, Sri Lanka, Uzbekistan and Viet Nam shared information on energy efficiency promotion initiatives in their respective countries. Some participants offered and others expressed interest in developing bilateral or multilateral collaboration for energy efficiency promotion. 32. The Executive Secretary and the Adviser of the Central Asia Energy Advisory Group (CAEAG) expressed appreciation of the ESCAP seminar and suggested that a similar seminar be arranged for participants from Central Asia. top G. Conclusions and Recommendations (Session 8) 33. During the deliberations in the Seminar, participants, resource persons and the consultant exchanged information on policies and programmes for promotion of energy efficiency investments at the national and international levels and reviewed available sources and prevailing modalities for related investment financing. 34. In their presentations, participants reaffirmed the importance of attaining more sustainable development paths through greater integration of environmental considerations in energy sector development, greater use of renewable sources of energy in energy supply and through active promotion of energy efficiency in both supply and demand sides. 35. Recognizing that affordable and clean energy is a precondition for all economic activity and for the improvement in living conditions, the seminar participants noted that great disparities persisted in the levels of per capita energy consumption between countries, between urban and rural areas, and between the more affluent and the under-privileged social groups. 36. The participants noted that in all developing countries energy supply and energy consumption would need to grow considerably if hitherto unmet energy needs are to be met. Recognizing the predominant reliance for current energy systems on fossil fuels, and being aware of the various environmental impacts of energy production and use, the participants emphasized the growing urgency of effectively addressing the issues of sustainability in energy systems at local, national, regional and global levels. 37. The participants agreed that energy efficiency is an important feature of energy security, and its promotion can enhance the prospects of economical development. By improving energy efficiency, a number of developing countries and those in transition may enhance the security of supplies. 38. It was emphasized that in the field of energy efficiency small-scale and medium-scale projects should not be overlooked in favour of large-scale projects. The funding of small projects should be viewed sympathetically by international funding agencies, such as the World Bank and the Asian Development Bank. 39. In their presentations, participants highlighted the various technical and economic potentials for energy efficiency improvements in various sectors, and in particular in energy-intensive and small and medium scale industries. Participants also discussed various barriers which tended to prevent energy efficiency investment opportunities from being realized. Major barriers included financing, pricing, lack of awareness and lack of manpower. 40. The participants observed that like all other forms of long-term financial investments, energy efficiency investments could not be expected under conditions of unstable economies, unfavourable business conditions, high rates of inflation or unstable exchange rates. 41. The participants noted that a combination of government policy initiatives and financing are required to effectively promote energy efficiency in industry. They felt that there was a need for a strong institutional mechanism to promote sustained energy efficiency activities at the national level. Government initiatives may take the form of regulation, financial stimulation or educational measures. Institutional development is also essential for effective energy efficiency promotion. top 42. Participants stressed the importance of an appropriate national regulatory framework for energy efficiency promotion. Participants took note that in a growing number of countries in the Asian and Pacific region, national energy management or energy conservation laws have been promulgated in recent years, and that the appropriate supplementary regulatory measures were also being formulated, refined and their implementation monitored. Participants recognized the merits of such regulatory measures which provided basic mandates for institutional development or for national technical advisory services, minimum energy efficiency standards, improved market transparency resulting from energy labels or other measures designed to enhance public or investor awareness for the benefits of energy efficiency investments. 43. It was agreed that the issues of promotion of energy efficiency and the financing of appropriate initiatives are interlinked; one issue cannot be resolved in the absence of the other. 44. The participants deliberated on possible options and methods of optimal investment financing strategies. They recognized that the allocation of internal as well as the successful mobilization of external sources of funds was equally important in the financing of energy efficiency investments. Participants reviewed the various aspects of the selection and financing criteria used by commercial financing institutes and development banks. 45. The establishment, consolidation or expansion of national energy efficiency promotion or energy conservation funds was considered as an instrument of crucial importance. Participants recognized the positive experience of the countries which have established such funds based on domestic revenues from direct or indirect forms of taxation on energy consumption for the purpose of providing financial incentives for energy efficiency investments. Participants recommended that funding mechanisms of this nature be seriously considered by other countries. 46. Significant interest was expressed in emerging financing schemes by Energy Service Companies (ESCOs), and participants felt that further research and information exchange on the contribution of the private sectors in this field would be useful to facilitate implementation of energy efficiency projects. 47. Participants noted that international organizations and financing institutions had an important role to play in making technical advice and financial resources available for industrial productivity development and energy efficiency projects in developing countries, as well as in countries with economies in transition. They observed that the provision of additional resources at more concessionnary terms of lending was desirable and important for the strengthening of national policy initiatives in this field. 48. The participants agreed that energy pricing was among the most important issues affecting the financial viability of energy efficiency investments. They recognized that energy prices below real costs of energy supply lead to under investment in energy efficiency. They also recognized the social and environmental benefits of energy efficiency. 49. Participants observed that in many countries measures had been taken to gradually adjust energy prices upwards to reflect the real costs of energy supply. However, in some countries further efforts may be required to raise energy prices to enable energy efficiency projects to compete financially on a level playing field with other technologies. Existing subsidies in favour of conventional energy technologies distort the market and discourage energy efficiency initiatives. 50. Participants noted the importance of further capacity building measures to counter the frequent lack of skilled personnel and lack of designated energy managers in industry. The participants shared information on energy manager training programmes that had been implemented or were being planned. Various countries expressed interest in the further intra-regional or international exchange of experiences in this field through various mechanisms, including technical cooperation among developing countries (TCDC). top 51. The facilitation or increase of private sector participation was recognized as an important option for development of the energy supply infrastructure, in particular in the developing countries. However, in reviewing the experiences and the initial impacts of electricity sector liberalizations in some of the industrialized countries and in some of the countries with economies in transition, some participants also expressed concern at the possibility that the goal of maximizing profits may act as a disincentive to energy efficiency. Participants believed that in liberalized electricity markets energy efficiency should be safeguarded by government regulation. 52. Participants agreed that the importation of old, polluting energy technology into developing countries should be controlled in light of energy efficiency objectives. 53. The seminar participants also exchanged information on international initiatives in promotion and financing of energy efficiency investments to mitigate greenhouse gas emissions. 54. The participants appreciated the up-dated information on the issues debated and on the outcomes of the 5th Conference of the Parties (CoP-5) to the United Nations Framework Convention on Climate Change (UNFCCC), held in Bonn, Germany, in November 1999, which was provided to the Seminar by the former Chairman of the UNFCCC Subsidiary Body on Scientific and Technological Assessment (SBSTA). 55. The participants expressed their concern of the fact that the Kyoto Protocol, adopted by the Parties to the Convention at their Third Session, held in Kyoto in late 1997, had thus far only been ratified by very few developing countries, whilst the ratification of the Protocol by a substantial number of the Annex 1 Parties to the Convention was a requirement for it to come into force. 56. The participants took note of the large number of technical aspects which have thus far remained unresolved concerning the envisaged implementation of the various flexible mechanisms, namely the "Clean Development Mechanism", "Emissions Trading" and "Joint Implementation". 57. Participants appreciated the analytical overview presented by the representative of the Institute for Global Environmental Strategies, Japan, on perspectives for private sector participation in the implementation of the "flexible mechanisms" for intended cooperation in GHG emission reduction. 58. The participants noted with appreciation the facilities and support services made available from the Global Environment Facility (GEF), jointly implemented by the World Bank, the United Nations Development Programme (UNDP) and the United Nations Environment Programme (UNEP). 59. The participants expressed their appreciation of the various governmental and private sector initiatives undertaken by the different authorities, agencies and companies from Japan, aimed at assisting developing countries through implementation of pilot projects under bilateral cooperation programmes. Representatives from several countries of the ESCAP region expressed interest in seeking similar assistance in the future. top 60. The Seminar participants noted that the existing international conventions relating to sustainable development do not as yet include any globally acceptable guidelines on the promotion of energy efficiency. The participants took note that the up-coming ninth Session of the United Nations Commission on Sustainable Development may provide a unique and useful opportunity for the international community to possibly give considerations to the formulation of such universal recommendations. 61. The representative of UN-ECE described the activities of UN-ECE Energy Efficiency Project 2000, and the more recently launched UN-ECE/UNFID Energy Efficiency Investment Project for Climate Change Mitigation. It was agreed that ECE and ESCAP should further develop a joint-cooperation programme to benefit Kazakhstan and the Russian Federation. 62. The representatives of the Central Asia Energy Advisory Group expressed their interest in continued collaboration with the ESCAP secretariat and recommended to possibly host and co-organize a follow-up "Central Asia Sub-regional Workshop on Financing of Energy Efficiency Investments", which is recommended to be held in Tashkent (Uzbekistan) or Almaty (Kazakhstan) during the second quarter of 2000. 63. The participants expressed their appreciation of the generous support extended by the Government of Japan to the energy efficiency promotion initiatives of the ESCAP secretariat, including the extra-budgetary resources made available for the project on "Promotion of public and private sector investment in energy efficiency". The seminar recommended the continuation of such activities and appropriate budgetary allocations. 64. Participants also expressed their appreciation of the professional, technical advisory services which had been made available to organizations in several of the participating countries during recent years by the JICA/ESCAP Expert on Energy Conservation/Efficiency, and by other staff members of the secretariat. top H. Adoption of the Report 65. The conclusions and recommendations were unanimously adopted during the closing session of the Seminar. The participants requested the Secretariat to prepare the full report for dissemination to the participants and other concerned. top |
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